Thursday, December 2, 2010

Leapfrogging in Brazil

Leapfrogging is a term that development economists, such as myself, use to describe situations in which less developed countries can simply jump over technology that they have been slow in developing.  The best example of this is perhaps telephones.  Old telephone systems required extensive networks of wire and relays that were expensive to construct and maintain.  It used to be in order to 'catch-up' to more developed countries in communications, less developed countries had to spend a lot of time and money to create these networks.  But not any more.  Technology has advanced making wireless telephony a much better and cheaper way to connect a country.  It is no surprise that some of the most explosive growth in cell phone use has been in developing countries and some of the slowest has been in places like the US.

I was reminded of this today when my friend suddenly remembered a bill he had that was due to be paid today.  Off he went to the bank where the ATM machines will read a standardized barcode printed on most bills and then allow you to instantaneously pay the bill with funds from your account.  Yes, you can do on-line bill pay as in the US, but as many Brazilians don't have access to computers or the internet, so the ATM solution is a useful option.  Wow, I said, I am from a backward country, we can't do this.

But then I got to thinking about why this has been developed here and not in the US.  My best guess is the expense and reliability of the US Postal Service.  Paying bills through the mail here is safe and reliable - perhaps this is different in Brazil.  I don't know, but it would not surprise me if mail service in Brazil has, at least in the past been slow, unreliable and expensive.  Rather than spending a lot of money trying to improve the postal service in Brazil, the market is figuring ways to use technology to get around it.

By the way, ATMs here do a lot of other things, like print checks when you need them and read biometric data from the palm of your hand - this to improve security.  The US is so backward.

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